Legal Question in Business Law in New York

Re: minority shareholder oppression

Yes, they can sue - the purchase of the shares is not required, only the ownership.

However, whether that lawsuit would be successful is an entirely different question - unfortunately, one that can't be answered based solely on the facts you gave.

If you'd like to discuss the situation, please feel free to get in touch.

Re: minority shareholder oppression

Can a minority shareholder ("MS") whose stocks were gifted to him/her sue for MS oppression? Sure; MS is a stockholder, no matter the manner of acquisition of the stock or the level of financial assistance to the company; a corporation can get sued by any stockholder anytime. Whether the facts bear the cause of action out or not, lawsuit is a risk that every corporation takes merely by existing.

Will MS win (that's actually your question)? I don't know. A lot depends on which state MS chooses to sue in. In NY, we're pretty friendly toward MS, which would make the business have to do handstands to show equitable treatment of all shareholders; in Delaware, they're a bit more business-friendly and assume that MS is sophisticated enough to understand the ramifications of a business deal (that's why businesses like to form in Delaware).

A lot also depends on the value of the company (which you haven't mentioned in your fact pattern). You say that you've already bought out a shareholder "a few years ago," and that you used this number as a guideline. That's an excellent starting place for you, but the court would have to determine whether the value of the company has changed since "a few years ago," and whether you took any change of value into account in your offer to MS.

You will, of course, have to show that all fiduciary duties have been properly carried out; from your statement of the facts, that shouldn't be a problem for you assuming you've kept the proper paper trails.

That you have paid no dividends to anyone would knock the wind out of the argument that MS has never received dividends and is therefore oppressed.

Good luck. Hope this helps. Feel free to contact me if you need my help handling this matter.

THE INFORMATION PRESENTED HERE IS GENERAL IN NATURE AND IS NOT INTENDED, NOR SHOULD IT BE CONSTRUED, AS LEGAL ADVICE. THIS POSTING DOES NOT CREATE ANY ATTORNEY-CLIENT RELATIONSHIP BETWEEN US. FOR SPECIFIC ADVICE ABOUT YOUR PARTICULAR SITUATION, CONSULT YOUR ATTORNEY.

Re: minority shareholder oppression

Yes, they may be able to bring some legal claims against you. I would need more information concerning the nature, corporate structure and value of the business in order to give you a better idea if they have a chance of prevailing.